Investment: Companies Gain Incentive to Show Their Social Skills

Article excerpt

It's been a busy couple of weeks for Friends Provident. Not only has the company announced a pounds 4bn stock market flotation that will bring an end to its mutual status, but the founder of the first ethical fund also announced another innovation - its social responsibility policy.

The Friends Provident Stewardship fund, the first-ever ethical fund, was launched by the UK insurer back in 1984. It has been emulated and followed by numerous other ethical funds over the past 10 years or so. Now, ethical alternatives are becoming run-of-the- mill in many investment houses, and there is a general feeling among independent financial advisers (IFAs) that it will soon become as "normal" to have an ethical fund as it is to have a UK fund.

The increase in the number of ethical funds is largely due to the growth in public awareness of environmental and social issues, which has driven demand for investment in companies that have positive environmental policies and which avoid industries and countries practising harmful activities. These include the tobacco trade, armaments, pollutants and child pornography.

And those who don't have money in ethical funds would like the companies they have invested in to become more environmentally aware. About 77 per cent of us would like our pension funds to adopt an ethical policy, according to research from Friends Provi- dent. The good news is that the new Pensions Act, due to come into force on 3 July, will ensure that fund trustees declare their stance on ethical investments.

Friends Provident's decision to encourage firms to adopt socially responsible management pre-empts the new legislation. It has pledged to try to persuade all of the companies it invests in to adopt best practice on human rights, child labour and environmental safeguards. …